Deal is the first of its kind to be financed by a major NZ bank
Specialist property lender Pallas Capital has successfully refinanced its flagship New Zealand lending facility, Pallas NZ Funding Trust No. 1 (PFT NZ).
Westpac NZ has provided new funding lines to support the $360 million facility, underscoring the credibility of Pallas Capital’s lending platform.
Dan Gallen (pictured above left), chief investment officer of Pallas Capital, said the company was delighted to announce its collaboration with Westpac in New Zealand.
“With such strong and experienced funders backing us, we look forward to expanding our suite of lending products and building upon our successes in the local market,” Gallen said.
Pallas Capital sees growth in commercial real estate loans
Since its launch in December 2022, PFT NZ has funded 60 commercial real estate (CRE) loans with a total value of approximately $300 million. It was originally funded by Credit Suisse.
PFT NZ lends money to borrowers across a range of CRE loan products including pre-development loans, residual stock loans and investment property loans.
Most of its loans are between $2-15 million in size, although it is able to fund larger loans where its credit criteria are met.
It targets medium-sized borrowers who can find it challenging to work with established banks and non-bank lenders in New Zealand.
PFT NZ is modelled on a corresponding Australian facility that was launched by Pallas Capital in November 2021, Pallas Funding Trust No. 2 (PFT No. 2), which has so far lent a total of approximately AU$800 million to medium sized SMEs in Australia.
Examples of how the institutional funding is being deployed across loans include a recent CRE loan by PFT NZ of NZ$22 million to a developer based in Auckland.
This loan was secured against five separate properties in Auckland and Napier with proceeds funding development activity on some of those properties.
Another loan of $3 million was secured against a project set to deliver 18 luxury townhouses in Mount Victoria, a premium suburb in central Wellington.
Additionally, a third loan of $16 million was secured against a retail and accommodation property in Queenstown, which was repaid through a new bank loan.
Although other non-bank lenders compete with PFT NZ, Gallen said many of these lenders are funded by retail or high net worth investors.
“These investment flows can be volatile, making it harder for them to consistently compete with lenders like Pallas Capital with committed institutional capital behind them,” he said.
Westpac NZ managing director of institutional and business banking, Reuben Tucker (pictured above right) said the funding deal is the first structured finance facility of its kind from a main New Zealand bank.
“Our team have worked hard with Mr Gallen and the team at Pallas Capital to come up with an innovative funding pathway that will allow them to be a competitive non-bank funder of commercial real estate debt products in Aotearoa,” Tucker said.
“We believe this funding structure will provide New Zealand borrowers access to alternative funding sources, and we’re looking forward to seeing the impact Pallas Capital will have in the market.”
Who is Pallas Capital?
Although PFT NZ will not undertake construction loans, these are offered in New Zealand through the existing Pallas Capital lending business.
Pallas Capital offers borrowers five core loan types, being acquisition, pre-development, construction, residual stock, and vacant land loans, along with the flexibility to negotiate LVRs and the required level of pre-sales for construction loans.
Pallas Capital also manages funds invested in commercial real estate loans secured against property assets with values between $1 - $50 million in major metropolitan areas.
Wholesale investors are offered investment opportunities providing fixed or variable rate returns supported by loans on single property assets or through warehouses that invest in a pool of such loans.
Pallas Capital said its loans are supported by robust due diligence on each borrower and the security property, a realistic and multi-faceted exit strategy, and active management of all loans by the Pallas Capital team throughout the term.
Pallas Capital and development manager Fortis comprise Pallas Group, a business that provides specialist investment, lending, and development solutions in the boutique property market in Australia.
